Question
Okavango ltd. sold goods at a price of $10,000 to its 100%-owned subsidiary Dog ltd. in 2015 at a gross profit percentage of 50%. At
Okavango ltd. sold goods at a price of $10,000 to its 100%-owned subsidiary Dog ltd. in 2015 at a gross profit percentage of 50%. At the end of 2015, 40% of the goods purchased from Okavango remained unsold in the ending inventory of Dog ltd. These goods were sold by Dog ltd to an outside party in 2016.
a. Provide all the necessary consolidation-related adjusting entries in 2015 and 2016 in relation to the sale of inventory by Okavango ltd to Dog ltd.
b. Would your answer have been different if the sale of inventory had instead been by Dog ltd. to Okavango. Explain your reasoning.
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